Bitcoin Foundation Gets Cease-and-Desist From Calif. Regulators

California telling the Bitcoin Foundation to cease-and-desist from changing money is like us telling California to stop being such a fiscally responsible and socially conservative state.

The Bitcoin Foundation does not trade, change, or exchange money for third parties. The closest thing to currency exchange that the organization does is to convert its own donated Bitcoins, via third-party exchange floors such as Mt. Gox, to U.S. dollars for purposes of spending -- such as when the Foundation held a convention in San Jose, California, last month.

That is exactly what any other company, organization, or individual would do if they traveled to, say, Canada, and held a convention in Victoria, British Columbia.

And yet, the Bitcoin Foundation received a cease-and-desist letter from California's Department of Financial Institutions -- a regulatory body that changes its name to the Department of Businss Oversight next week. The letter contains a number of threats regarding daily fines, felony charges, and other niceties if the foundation continues with their egregious unlicensed money transmission activity, reports The Verge.

Interestingly enough, the letter seems to be part of a nationwide trend of state and federal agencies looking closer at the Bitcoin movement and whether the virtual currency is subject to state and federal laws. It's also another chapter in the startups versus state debate over whether outdated state laws are chilling technological innovation.

If the Bitcoin Foundation doesn't change money, what does it do? Ironically enough, it's an organization dedicated to best practices, setting universal standards, and ensuring that investors don't get taken advantage of by unstable "virtual hedge funds" and hackers. In short, it is seeking to legitimize Bitcoin by cleaning up the practices of companies dealing with the nascent currency.

One would think that standardization, best practices, increased security, and other positive aims would be something that state governments could agree with. After all, we're all after the same things (consumer protection, minimizing fraud and other crime), aren't we?

Lets hope, for Bitcoin's sake, that the Bitcoin Foundation doesn't cease-and-desist, and that state governments, before volleying threats, do further research before asking an orange to stop being an apple.